CALGARY, Jan. 15, 2019 /CNW/ – Tourmaline Oil Corp. (TSX:TOU) (“Tourmaline” or the “Company”) is pleased to update 2019 guidance and ongoing EP activities.
PRODUCTION UPDATE
- 2019 average production guidance of 300,000 boepd, representing 12% year-over-year growth, remains unchanged. A 1H 2019 average production range of 290,000-300,000 boepd and a 2H 2019 average production range of 310,000-320,000 boepd are forecast.
- Current production is within the 1H 2019 guidance range of 290,000-300,000 boepd. Tourmaline expects production levels above 300,000 boepd in late January when the Company’s volumes that flow to the Enbridge McMahon plant (approximately 4,500 boepd) come back on-stream when plant repairs are completed.
- Total liquid production has reached a record high of between 56,000 and 57,000 bpd (oil, condensate, NGLs).
- 2019 forecast average production of 300,000 boepd includes a 9% unscheduled downtime provision, up from the 5% used historically, providing considerable flexibility and upside.
- Construction of the 50,000 boepd Gundy deep cut facility remains on schedule for a June 2019 start-up. The plant will add between 35,000 and 50,000 boepd of net new production depending upon the levels of existing volumes that the Company elects to continue flowing to third-party facilities.
- The Company will have approximately 125 new wells available to be brought on production between January 15 and June 30, 2019.
FINANCIAL, CAPITAL BUDGET UPDATE
- The 2019 EP capital program has been reduced to $1.225 billion from the $1.3 billion announced on November 7, 2018(1). The Company had reduced 2019 capital by 4% and increased 2019 production guidance by 3% at that time.
- The $75.0 million program reduction includes fewer delineation wells in two complexes and lower completed well costs across all three core complexes. These capital reductions will have no impact on 2019 production guidance. The Company has identified a further $30-50 million in potential program reductions that won’t affect 2019 production but may affect 2020 growth plans. The Company will monitor commodity prices during the first half of the year prior to implementing any further budget changes.
- Full-year 2019 cash flow(2) of $1.67 billion is anticipated, yielding approximately $330 million of free cash flow(3). The current full-year dividend is $109 million providing the opportunity for potential modest dividend increases in 2019.
- The Q4 2018 cash flow estimate remains in the $380-410 million range.
- The average Q4 2018 NYMEX price of U.S.$3.80/mcf vs the U.S. $3.30/mcf utilized in the Q4 2018 cash flow estimate results in higher netbacks at the U.S. hubs where Tourmaline currently has 440 mmcfpd of long-term firm transport arrangements accessing six gas sales hubs. The Company currently has approximately 315 mmcfpd of NYMEX differential deals (including physical and financial) with an average differential of $(0.43)/mcf.
- The Company will have another 100 mmcfpd of long-term transport to the West Coast U.S. market when the TransCanada GTN expansion is completed in the 2nd half of 2019. This will be timed to provide a higher-priced market for a significant portion of the additional 200 mmcfpd of gas volumes derived from the commissioning of the N.E.B.C. Gundy facility.
- Oil differentials have returned to normal levels more closely aligned to what the Company had forecast for 2019.
- A year-end 2019 net debt(4) to cash flow ratio of 0.8 is anticipated as the Company continues to maintain a very strong balance sheet.
EP PROGRAM UPDATE
- The Q4 2018 EP program yielded successful, large scope, liquid rich, new pool wildcat discoveries in the Alberta Deep Basin and NEBC Montney operated complexes. Tourmaline will continue to exploit profitable new horizons with the ongoing EP program in all three core complexes; approximately five new exploitation/exploration wells are planned in 2019.
- The Company is pursuing multiple new technologies to allow for delivery of the 2019/2020 EP programs for significantly less total capital than currently budgeted. Several of these new cost reduction opportunities were successfully trialed in 2018 and will be implemented on a broader scale with the 2019 program.
- Tourmaline is planning to conduct all of the scheduled 2019 fracturing operations with Canadian service providers.
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(1) |
The capital reduction has not been reflected in the Company’s current formal guidance. The Company intends to update formal guidance, including these capital reductions, along with the year-end financial results in March 2019. |
(2) |
“Cash flow” is defined as cash provided by operations before changes in non-cash operating working capital. See “Non-GAAP Financial Measures” in the Company’s Q3 2018 Management’s Discussion and Analysis. |
(3) |
“Free cash flow” is defined as cash flow less Total Net Capital Expenditures. Total Net Capital Expenditures is defined as total capital spending before acquisitions and non-core dispositions. Free cash flow is prior to dividend payments. See “Non-GAAP Financial Measures” in the Company’s Q3 2018 Management’s Discussion and Analysis. |
(4) |
“Net debt” is defined as bank debt plus working capital (adjusted for the fair value of financial instruments). See “Non-GAAP Financial Measures” in the Company’s Q3 2018 Management’s Discussion and Analysis. |